London Stock Exchange Group and TMX Group Inc. have formed of a new strategic partnership in derivatives, the groups announced Tuesday.

At the core of this collaboration is the development of EDX London, the equity derivatives business of the London Stock Exchange. Specifically, London Stock Exchange will acquire a licence to use SOLA Trading, a derivatives trading technology developed by Montreal Exchange, a subsidiary of TMX.

In addition, TMX is in advanced negotiations with London Stock Exchange to acquire a minority position in EDX London.

“TMX is very proud of the SOLA technology and we are pleased that London Stock Exchange Group has chosen the platform for its derivatives businesses,” said Thomas Kloet, TMX chief executive, in a release. “We are also very excited about the opportunity to participate in the growth and development of the European derivatives market.”

“The use of SOLA will give the group a state-of-the art, proven derivatives trading platform, significantly increasing our ability to develop our derivatives markets,” said Clara Furse, chief executive of London Stock Exchange Group.

“Moreover, our partnership with TMX offers exciting scope for developing new products, building on our recent success with our highly liquid Russian derivatives market,” Furse added.

It is anticipated that EDX London, which offers access to trading and clearing services in Nordic and Russian equity and fixed income derivatives, will move onto SOLA Trading technology in November 2009. The introduction of new trading technology will bring lower latency and richer functionality, providing member firms with new opportunities to develop their trading strategies and broaden their service offering through the provision of Direct Access.

According to TMX Group, SOLA Trading provides an extremely fast and reliable trading system for a variety of financial products such as options and futures. It is scalable, enabling the introduction of new products and significant volume growth with limited incremental costs. SOLA offers exceptional performance and capacity at a very low cost, positioning it as one of the leading derivatives platforms in the world.

IE